Scammers attack 'social' news sites

Social news websites like Digg.com provide no guarantees about a story's factual accuracy

The rise of so-called 'social' news websites is providing new opportunities to spammers and scam artists seeking to manipulate stock prices.

Social news websites such as Digg.com, Del.ici.ous and Reddit allow users to submit and promote news items. By letting other users vote in favour of a story, items get promoted to the front page, which in turn attracts additional visitors. 

While the systems allow small publications and blogs to quickly reach large audiences, they provide no guarantees about a story's factual accuracy.

This makes them a potential target of spammers and scam artists who might seek to exploit the social voting aspect for financial gain.

The topic received attention after Digg.com promoted a series of blog postings in which blogger Daniel Harrison speculated that Google is about to acquire Sun Microsystems.

As the Silicon Valley Sleuth blog reported earlier, the speculations lacked a foundation and contained numerous factual errors. But this did not prevent the posts from reaching a prominent position on Digg.com. 

Harrison claimed, for instance, that Sun chief executive Scott McNealy " received $10m in Sun equity", and described this as typical pre-merger behaviour allowing him to profit from a jump in Sun's stock price after the "merger" was announced.

In a second post Harrison attributed information about the transaction to an "anonymous" source.

The transaction was in fact the result of McNealy's exercising stock options in which he first bought the stock and sold it on the same day. It was reported in a public filing to the Securities and Exchange Commission.

The blog postings were edited after vnunet.com confronted Harrison with these inaccuracies.

Several experts contacted by vnunet.com described it as unlikely that the prominent position on Digg.com was a result of 'gaming', a phenomenon where a user manipulates the system to promote a story.

The experts instead attributed it to "group thinking and gullibility" on the part of Digg users.

Services such as Digg.com could be prone to stock price manipulation schemes where people collaborate to give the story enough votes to reach the front page.

Users could also use social engineering techniques by writing about companies that tend to draw people's attention like Apple or Google.

Using the internet to manipulate stock prices is far from new. There are known cases where scam artists spread fake rumours through bulletin boards or spam email in an effort to drive stock prices up or down. Such scams typically involve small cap funds with more volatile stock prices.

"Tools like Digg, email and discussion boards have always been able to do this," said Charlene Li, an industry analyst at Forrester Research covering online trends.

"It gets easier and faster to highlight things, and people are going to have be more aware of the shortcomings of these kinds of rumours."

Digg chief executive Jay Adelson also deemed it unlikely that the blog poster in this case defeated the page's ranking system. He also pointed out that one of the links on Digg.com was flagged by users to indicate that its accuracy was under review. 

"I don't think it's possible to 'game' Digg because it requires such a mass of people who have been vetted through our algorithms," Adelson told vnunet.com.

Digg ranks stories based on a 'voting' system and a 'karma' system. While Adelson declined to talk in detail about the karma system, he said that a story typically requires about 30 'diggs' to get promoted to the front page, but that the positioning is also influenced by the karma system.

"The karma system takes into account some understanding of individual diggers. You are looking for patterns where significant numbers of users over some period of time are creating a signature. By determining how they digg a particular story, we are able to react automatically or by our staff," Adelson said.

There are known cases in which users succeeded in manipulating Digg into promoting stories to its front page. 

Last December an individual known as 'KoolAidGuy' demonstrated that he succeeded in promoting a number of stories to the Digg.com front page by using a series of accounts to vote for particular stories. He claimed that he had been using his method for several months.